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Appeared on: Tuesday, December 07, 2004
Parsons: HD-DVD is a piracy stopper

The potential pirating of movies remains a major concern for Time Warner, and that's one reason the company is advocating the new HD-DVD platform, Chief Executive Richard Parsons said Monday.

Speaking at the UBS Media Week Conference, Parsons told the gathering that the film and video industry can be much more effective than the music industry in dealing with file sharing.

While Napster and other file-sharing programs allowed users to grab just the songs they wanted off albums, undermining CD sales, movies are entirely different, he said.

'First of all, movies ... are a unitary product: Either you want the [whole] movie or you don't want it. And there are multiple ways to see them already. You can go to the theater; you can watch it on pay-per-view; you can watch it on cable, DVD and so forth.

'Secondly, it's a heavier download. That's why we're pushing to get HD-DVD in place,' added Parsons. The new technology -- developed by Toshiba and backed by Time Warner's Warner Bros. and New Line Cinema, Viacom (NYSE: VIAb - news) 's Paramount Pictures and NBC Universal's Universal Pictures -- has far greater storage capacity than DVDs currently on the market.

'Right now, you can probably download a DVD in two, three hours,' said Parsons. 'This HD-DVD product is a day's download. And that'll be a big step [for the industry], to make downloading just super, super, super inconvenient.'
Time Warner still intends to forge ahead with plans to allow 'reasonable' paid downloads of its video content, he added.

The executive also indicated that his company is anxious to have Microsoft (NASDAQ: MSFT - news) build safeguards into the new version of its Windows operating system that will prevent file sharers from being able to play back movies that have been downloaded illegally.

Addressing other topics, Parsons dismissed the perception that increased competition will hurt Time Warner's cable operations. 'If I hear this one more time, I'm going to be sick -- that the phone companies are coming [to get us]. We have the only platform that can provide voice, data and advanced digital video in the same bundle. Other companies may be talking about it or planning it, but we're the only ones that are actually doing it.'
Analysts and other investors have been concerned about the ability of regional phone companies to steal customers from cable providers by offering such a package of voice, data and video services, since they already have a direct pipeline into most homes through telephone lines, and are accumulating an increasing share of broadband users.
Deutsche Bank Securities analyst Doug Mitchelson said last week that he expects the regional Bells to grab 7.5 million video subscribers by 2010, or 24 percent of the 40 million homes that would have access to such services. These customers would represent a pay-TV market share of about 7.3 percent, he told clients.

Mitchelson did add, however, that he believes cable will ultimately be strengthened by the competition.

Parsons declined to give a formal forecast for 2005, saying only that the company 'feels good' about its prospects.

Cable operations should post 'top and bottom line double-digit growth' in 2005, he said, with the basic cable networks -- including TBS, TNT, Turner South and others -- generating 'reasonably strong advertising growth.'

In Parsons' view, the ad dollars in television will continue to 'follow the eyeballs' from the broadcast networks to cable. Though it is losing 'The Sopranos' after next season, HBO 'knocks the ball out of the park,' he added.
Movies will have 'the greatest difficulty' in the new year, due to extremely difficult comparisons with the 2004 DVD release of New Line's 'Lord of the Rings: The Motion Picture Trilogy,' according to Parsons.

He said that Warner Bros. has been the 'most consistent studio out there' in both film and television production.